Europe's second largest carmaker Peugeot Citroen announced that it would cut 2700 jobs across its sites in France along with 850 executive and professional positions in Rennes where the company produces mid-range and high-end vehicles.
PARIS/BERLIN - A fresh round of job cuts at Peugeot Citroen underscored the auto sector's woes on Thursday as French President Nicolas Sarkozy vowed help for the struggling industry.
The European Investment Bank (EIB) is to pledge 2 billion euros ($2.5 billion) to help the struggling industry, according to a German government paper obtained by Reuters, but in the meantime auto sales are falling and manufacturers are retrenching.
PSA Peugeot-Citroen SA, Europe's second-biggest carmaker after Volkswagen AG in terms of European sales, said it planned to cut 2,700 jobs across its sites in France where it had a workforce of 114,000 in 2007.
It will cut a further 850 executive and professional positions at its Rennes site in western France, which makes mid-range and high-end vehicles, a segment in decline.
"The problem is linked to the current climate, but is structural too (at Rennes)", where the group makes the Citroen C5 and C6 models, a Peugeot spokesman said. Nine hundred workers from Rennes will also be redeployed to other sites.
The group forecast sales volumes for the market as a whole would drop 17 percent in the final quarter of this year in main European markets and by at least 10 percent in 2009.
Sarkozy said France would not leave large parts of the economy vulnerable to the economic crisis, picking out the car sector for special mention.
"I will not leave entire sectors unarmed in the face of the crisis. I am thinking about the automobile sector," he said in a speech on a visit to aerospace supply company Daher near Paris.
Meanwhile the German government document said the European Union is proposing a public-private partnership for the auto sector to boost green technologies, along with supply-side measures such as lower taxes on environmentally friendly cars.
The EIB would contribute 2 billion euros ($2.5 billion) as part of the plan, the paper said.
Senior EU officials had said on Wednesday European carmakers may need financial aid from the bloc and its governments, with General Motors Corp unit Opel seen as a possible emergency case.
European auto makers have asked for 40 billion euros ($50.5 billion) in soft loans, while Opel is negotiating aid with the German government. Its parent GM and other carmakers are seeking a U.S. government bailout.
However chances for the U.S. bailout dimmed as Democrat leaders expressed deep skepticism on Wednesday the talks would lead to a an acceptable compromise.
A last-minute plan being crafted by Republican senators would provide $25 billion in support but Congress has at most two days left of its post-election session.
Without a deal in that time, any bailout is likely to have to wait until the new administration takes over in January.
"I won't say it's completely over. I'm still having conversations with people. But it doesn't look good," Sen. Robert Bennett, a Utah Republican, said.
Failure to craft a deal carries the risk that one or more of the U.S. automakers -- General Motors, Ford Motor Co or Chrysler LLC -- could be forced into bankruptcy.
Separately GM and Toyota Motor Co said they would cut production at plants in Thailand.
In France Peugeot Human Resources Director Jean-Luc Vergne said the company had to act or would put its future in danger.
The company slashed its 2008 profitability outlook in October and announced big production cuts to combat the sales crisis after posting a 5.2 percent drop in third-quarter sales.
"They had to do something," said analyst Ulrich Horstmann at Bayerische Landesbank. Whether the latest wave of job cuts will be enough will depend on what happens to demand, he added.
Car sales have fallen steeply as the effects of the global financial crisis have rippled out into the wider economy. Carmakers are slashing costs and extending the usual Christmas plant idling by a few more weeks to save cash.
Nissan, GM and Ford said in October they would cut output at European sites.
"The catastrophe is that demand is going down more than ever," Horstmann said.
Peugeot will present the plan to shed 2,700 jobs to its works council on Dec. 2. It has not yet set a date to present the separate Rennes plan for 850 departures.
It has already cut 7,400 jobs since 2007 through voluntary redundancy.
Peugeot shares were down 4.5 percent at 12.73 euros at 1321 GMT, underperforming the DJ Stoxx European auto sector index, which was down 2.7 percent.
Date created : 2008-11-21